Phase 4:

The Process

When you begin your work with an M&A Advisor to sell your business, they will ask you a series of questions about your business and your goals. There are two primary reasons we ask as many questions as we do:

  1. We need all the information that will be relevant to the buyer. Having this information up front speeds the buyer’s decision process and reduces the amount of time they’ll spend in due diligence if their bid is accepted. Further, we want to know your business as well as you do so we can be effective in the sales process.
  2. We will need the information to put together your Confidential Information

Memorandum (aka the Dealbook), which is our key marketing tool.

Information About Your Business

Below is a partial outline of the information about your business we’ll ask you to provide when we begin the engagement to sell your business. (Note that our actual questionnaire is 14 pages and much more comprehensive)

History and Organization

  • The history and complete timeline of your business
  • The business structure and ownership
  • A current organization chart
  • A list of key people, your concerns about key staff, and what these key people do daily
  • A copy of your employee benefits statement and employee handbook
  • All required licenses
  • A list of any outstanding or past legal and tax issues
  • Contact information for CPA, attorney, etc.

Products and Services

  • List your principal products and services
  • Describe these products and services
  • Sales histories of products and services
  • Competitive analysis
  • Patents, copyrights, etc.
  • Product delivery
  • Warranties
  • Technology assessment

Industry Overview

  • Describe the industry in general
  • Discuss current trends
  • What’s your vision of the future of the industry?
  • What are the demographics?
  • Describe the greatest problems, challenges, and opportunities

Your Customers

  • Describe in detail your primary customers
  • What’s their payment history and purchasing process?
  • What major customers have been recently lost?
  • Have any been recently gained?
  • Describe their buying cycle

Sales and Marketing

  • Present your marketing plan and sales manuals
  • Describe your marketing process
  • Describe your sales force
  • How do you advertise and promote your products and services?
  • What are your distribution channels?


  • List your significant competitors
  • How will your key accounts react to the sale?
  • How will your competitors react?
  • Describe the competitive environment

Vendors and Suppliers

  • List your key vendors and suppliers
  • Are there any who are crucial to the operation of the business?
  • Any history of problems?
  • Who supplies the competition?


  • Provide detailed information about your facility
  • Owned or rented? Square footage?
  • Is the lease assumable?


  • A complete list of capital equipment that will be transferred to the new owner
  • The general state of the equipment
  • Maintenance records and contracts
  • Equipment warranties
  • Safety manuals and practices


  • Year-end financial statements or business tax returns (3 years)
  • Latest monthly statements (income statements, balance sheets
  • Sales by month for past 2 years
  • Detailed category breakdowns – sales and cost of goods sold by category, payroll summary, insurance policy data, utility expenses and other major expense breakdowns
  • Itemization of owner’s discretionary income, a list of any one-time or extraordinary, nonrecurring income and expenses, detail of accounts and notes payable and receivable, and a list of company-related debts, complete with amounts, rates, terms and conditions
  • Working capital explanations – seasonal inventory levels and accounts receivable details and norms.
  • List of all furniture, fixtures, equipment, vehicles, and inventory
  • List of intangible assets and liabilities
  • Company brochures and history- price lists, brochures, pamphlets, marketing manuals, advertising
  • Legal documents of the business – real estate surveys, plot plans, tax assessment records, deeds, partnership agreements, corporate by-laws
  • Internal management information – budgets, marketing studies, business plans or previous appraisals

The Confidential Information Memorandum

At KO, we spend countless hours creating what we call your Confidential Information Memorandum (CIM). The CIM is a comprehensive document designed to sell prospective buyers on your business. The people who buy middle market businesses are

busy. An investor may look at dozens of businesses daily and has to make a go/no go decision quickly. Another business owner looking to acquire established businesses is also busy running his day-to-day operations.

Generally, you as the Seller are interested in:

  • Obtaining the highest purchase price
  • Transferring the business to a quality buyer whom you can trust to safeguard, maintain and grow the business that you have worked years to build
  • Minimizing the income taxes resulting from the transaction
  • Funding your retirement or new business ventures

The typical investor or business owner who wants to buy a business wants to:

  • Purchase a quality business
  • Have the actual business purchased be consistent with what the buyer believed he or she was purchasing
  • Obtain a fair price for the business purchased
  • Protect his or her assets against the potential failure of the business after the completion of the purchase
  • Minimize the cash investment
  • Leverage his skills, prior experience, or existing business resources

Every buyer has specific objectives in mind. Our priorities are to make your business look attractive to the buyer, and subsequently quickly and easily close the sale. To this end, a significant part of our sales process is the creation of your CIM.

Creating the CIM for Selling Your Business

A major portion of the CIM comes from information and data you supply us during interviews and data request. The rest comes from our knowledge of your industry and research we conduct. We’ll provide you with a Request for Data (RFD) and a list of other information or items we need. After we complete our initial discussions and gather all the relevant information, we get to work on the CIM.

Think of it as a 40+ page brochure that contains all the information a potential buyer will need to say yes or no and to express interest in proceeding to the next step. While we’re creating the CIM, we’re also constructing our pre-vetted list of potential acquirers.

The information that goes into the CIM dovetails with the information we requested from you above. Here’s a quick summary:

  1. History Timeline. This includes your company history and revenue history, as well as any other historical information that might attract a buyer.
  2. Company Overview. We tell them just enough about your business to pique their interest and let them know within seconds if yours is a business that will be of interest to them.
  3. Business Structure & Ownership. They’ll need to know things like who owns the business, how the shares are divided, the legal structure of the business, etc. We might also include in this section your reason for selling if we feel it’s relevant. That’s often the first question we’re asked.
  4. Organization. Here we’ll include things like a description of your day-to-day operations, resumes of key employees, and reference to additional documents, such as employee benefits or employee handbooks.
  5. Products and Services. This section is critical, but sometimes no more important than the organization. Some buyers may be more interested in your people than your products. In this section, we’ll include cover shots, photos, and images. We’ll talk about the typical applications of the products, provide sales by model, and include any information about patented or proprietary products. If applicable, we’ll also discuss your manufacturing process and any warranties.
  6. Research & Development. Some buyers may be interested in knowing how well your business is set for the future. For example, what are your R&D expenses in relation to revenue?
  7. Customers. We’ve sold businesses, where all the buyer wanted was access to the customer base. Here, we’ll list your key customers and talk about your relationship with these customers. Depending on confidentiality we may omit actual names of customers
  8. Industry Overview. We’ll research and include things like an industry outlook and any trends we see in your industry. Are there any regional or other advantages you might have in the industry.
  9. Competition Overview. Who are your major competitors? What are your strengths or advantages, and what are your weaknesses or disadvantages?
  10. Growth Opportunities. We’ll examine your existing sales and marketing practices, and then identify specific areas of growth you and we see for the buyer. We’ll lay out the growth strategies as we see them, including any new markets, product growth, service growth, or geographical growth. This section is typically the second thing Buyers look at after profitability and we go to great lengths on how to grow the business. The more growth potential within the the market, the higher the price, growth potential is a big value driver.
  11. Vendors. Your relationships with your vendors is an important ingredient to your success, as it will be to your successor. Who are your key vendors? What agreements do you have in place with them?
  12. Facilities. We’ll provide images and photos to show potential buyers what they’ll be getting.
  13. Equipment list. In the CIM, we’ll list the major equipment, then include the entire list in an appendix if necessary. The buyer will want to know all about your equipment list—age, model, depreciation schedule, etc.
  14. Financials. We’ll include a Financial recast. We will prepare a separate Financial Appendix available for buyers at a later stage.

Finally, we’ll include a separate “Non-Binding Proposal” page where the buyer can express an interest in bidding on your business. Once the buyer has made an offer that you have accepted, you sign the LOI an move into the next and last phase: The Close. For more on that, go to Phase 5, The Close.